Gratuity amount on retirement, resignation or termination · Tax exemption under Section 10(10) · FY 2026-27
Disclaimer: Calculated per the Payment of Gratuity Act, 1972 (as amended). Employees covered under the Act use the formula (15 × Last Drawn Basic+DA × Years of Service) ÷ 26; those not covered use ÷ 30. A final-year period of 6 months or more is rounded up to a full year, less rounded down. Tax exemption under Section 10(10) is the least of: actual gratuity received, ₹20,00,000 (current statutory ceiling), or the formula amount — government employees are fully exempt regardless of amount. Minimum 5 years of continuous service is generally required for eligibility (waived on death or disablement). Results are estimates — verify with your employer's HR/payroll team for exact figures.
Gratuity is a lump-sum benefit paid by an employer to an employee as a token of appreciation for continuous service, on retirement, resignation, superannuation, or termination (other than for misconduct). It is governed by the Payment of Gratuity Act, 1972 for most employers, and is generally payable only after a minimum of 5 years of continuous service — except in cases of death or disablement, where this requirement is waived.
Type your last drawn monthly Basic salary plus Dearness Allowance, or use the slider and quick presets.
Add your total years and any additional months of service — the calculator applies the Act's 6-month rounding rule automatically.
Choose whether your organisation is covered under the Payment of Gratuity Act, and whether you're a private-sector or government employee, for the correct formula and exemption rule.
See your total gratuity amount, along with the tax-exempt and taxable portions under Section 10(10), plus your eligibility status.
For employees covered under the Payment of Gratuity Act, gratuity is calculated as:
| Variable | Meaning | How to find it | Example |
|---|---|---|---|
| S | Last drawn monthly Basic + DA | From your final salary slip before leaving | ₹40,000 |
| Y | Years of service (rounded) | Total tenure; ≥6 months in the final year rounds up | 7 years |
| 15/26 | Wage rate for 15 days per year of service | Fixed by the Act; based on a 26-working-day month | Constant |
| G | Gratuity amount payable | Calculated output | ₹1,61,538 (approx.) |
Inputs: S = ₹40,000 | Y = 7 years | Covered under the Act (divisor 26)
For employers not covered under the Act, the same structure applies but with a 30-day divisor instead of 26 — this generally produces a slightly lower gratuity amount for the same salary and tenure, though the exact policy can vary by employer since it isn't governed by a single statutory formula.
Gratuity is generally payable only after 5 years of continuous service with the same employer, whether you resign, retire, or are terminated (other than for misconduct).
The 5-year requirement does not apply if service ends due to the employee's death or permanent disablement — gratuity becomes payable regardless of tenure.
In your final year of service, a period of 6 months or more is rounded up to a full year for gratuity calculation; less than 6 months is dropped entirely.
Gratuity can be wholly or partially forfeited if employment is terminated for proven misconduct involving violence or an offence involving moral turpitude, as per the Act.
Gratuity received is exempt from tax under Section 10(10) of the Income Tax Act, up to certain limits depending on your employer type:
| Employer Type | Exemption Limit | Basis |
|---|---|---|
| Government Employee | Fully exempt — no ceiling | Section 10(10)(i) |
| Private Sector (Covered under the Act) | Least of: actual gratuity, ₹20,00,000, or formula amount | Section 10(10)(ii) |
| Private Sector (Not covered under the Act) | Least of: actual gratuity, ₹20,00,000, or half-month salary × years | Section 10(10)(iii) |
For employees covered under the Payment of Gratuity Act, gratuity is calculated as (15 × Last Drawn Basic+DA × Years of Service) ÷ 26. For employees not covered under the Act, a 30-day divisor is used instead. A final-year service period of 6 months or more is rounded up to a full year; less than 6 months is dropped.
Generally, a minimum of 5 years of continuous service with the same employer is required to be eligible for gratuity, whether you resign, retire, or are terminated for reasons other than misconduct. This 5-year requirement is waived if employment ends due to the employee's death or permanent disablement.
Gratuity is exempt from tax under Section 10(10) of the Income Tax Act, up to certain limits. Government employees receive full tax exemption with no ceiling. Private-sector employees are exempt up to the least of: the actual gratuity received, ₹20,00,000 (the current statutory ceiling), or the amount computed under the applicable formula. Any amount beyond this is added to taxable income.
The ₹20 lakh figure is the maximum lifetime tax-exempt gratuity a private-sector employee can receive under Section 10(10)(iii), revised upward from ₹10 lakh in 2024. It applies cumulatively across all employers over your career, not separately for each job — so gratuity exemption already claimed from a previous employer reduces the exemption available for a subsequent claim.
Organisations with 10 or more employees on any day in the preceding 12 months are covered under the Act, and once covered, remain covered even if headcount later falls below 10. Covered employers use a 26-day divisor in the gratuity formula. Smaller organisations not covered under the Act may still pay gratuity under their own policy, typically using a 30-day divisor, though terms can vary since there is no single statutory formula governing them.
Yes — under the Payment of Gratuity Act, gratuity can be wholly or partially forfeited if an employee's service is terminated for proven misconduct involving violence, or for an offence involving moral turpitude committed during employment. Termination for ordinary performance-related reasons does not affect gratuity eligibility.
No — they are distinct retirement benefits. EPF is a monthly, joint employee-employer contribution (typically 12% each of Basic+DA) that accumulates with interest over your career. Gratuity is a one-time lump sum paid entirely by the employer, calculated from your final salary and total years of service, and is not linked to your EPF balance in any way.
A gratuity calculator using the correct statutory formula, the right divisor (26 or 30 days) for your employer type, and the current ₹20 lakh exemption ceiling should closely match what your employer's HR/payroll team calculates. However, exact figures can depend on employer-specific policies (for non-covered organisations) and your precise service record, so treat calculator output as an estimate and confirm with HR before relying on it for financial planning.
Other tools that pair well with this one.